Tec'S Rs 500-Cr Bond Issue Gets Laaa Rating

The Tata Electric Companies (TEC) will raise Rs 500 crore through a bond issue to fund its long-term capital expenditure project. The issue was assigned an LAAA rating by the Investment Information & Credit Rating Agency (Icra).

TEC comprises the Tata Hydro Electric Power Supply Company Ltd, the Andhra Valley Power Supply Company Ltd, and the Tata Power Company Ltd. The companies have the licence to generate and distribute bulk power to Mumbai till the year 2014, an Icra statement said. The cost of generating power is lower than that for other licencees in the country because of its fully-depreciated hydro-electric plants, Icra said.

 

TEC registered a turnover of Rs 2,615 crore and a profit after tax of Rs 320 crore in 1997-98. "TEC has a strong financial position which is reflected in its low gearing of 0.74 and a high interest coverage of 3.94 in 1997-98," Icra said. "The liquidity position of the companies is comfortable".

The rating agency has said that the business risk was low because returns are governed by the Electric Supply Act (11948) which allows a fixed return (known as the reasonable return) on the capital base of the companies. TEC is planning to put a 500-mw multi fuel plant near Mumbai to meet the demand growth in Mumbai. The project is awaiting clearance from the Maharashtra State Electricity Board.

Icra's rating takes into account the operational and financial strengths of the companies. The rating agency expects the companies to continue getting their reasonable return in their licences area as in the past. Additionally, the diversification into CPPs and IPPs has reduced the business risk of the companies while preserving their low financial risk.